The Documents Required to Pass Through KYC as an Individual or Business

When registering for any financial services provider, (our focus is money transfer companies) particularly those handling your payments, you will be expected to go through an identification and verification procedure when you register for an account. This is often referred to as the onboarding or Know Your Customer (KYC) process – banks are notoriously slow at it and fintechs have been trying to bring it into the 21st century. It’s everyone’s favourite bug bear but in reality we should understand the need to get proper customer due diligence done in order to combat financial crime. In this article we provide a heads up on the documents required to pass through KYC and what you can expect from a typical onboarding process. We’ll look at the UK KYC requirements, EU KYC requirements and the KYC requirements in Australia.

KYC Requirements UK

When you think about money laundering regulations and customer due diligence you probably associate it with the FCA. It’s worth pointing out though that they’re not actually ‘FCA KYC requirements’. They are legal requirements enshrined into law by the UK government. The FCA is then responsible for monitoring that these laws are being adhered to. That’s why financial services firms will often refer to the FCA handbook for guidance – it’s the sure fire way of adhering to UK money transfer and money laundering regulations.

Documents Required to Pass Through KYC as an Individual

KYC requirements for individuals are usually pretty straight forward. It’s a case of providing:

  • Your name.
  • An ID including a photo, usually a passport or driving license.
  • Your residential address (with accompanying proof) and date of birth.

The better service providers in our industry with an online money transfer system will invest in onboarding software that can verify your address against the electoral register and credit agencies such as Experian and Equifax. If they’ve been unable to verify your address through these channels or don’t have onboarding software of this type, they’ll ask you to provide a utility bill. This normally has to be gas or electric as mobile phone contracts can be too easy to set up at an alternative address not belonging to you. If you’re an international client registering for a UK money transfer company then their onboarding software is unlikely to cover your country, so you should expect to provide a utility bill in this instance as well.

Nowadays, you might find yourself taking a selfie and picture of your ID and uploading it through an app. These are some of the techniques fintechs are adopting to speed up the onboarding process.

Enhanced Due Diligence for Individuals

In some cases, individuals may have to go through enhanced due diligence. This could be the result of a few factors, perhaps you’re fortunate enough to be sending large volumes (usually multi-millions), or you’re registering from a deemed ‘high-risk country’, or it could be that you are a Politically Exposed Person (also known as a PEP) – either as a politician yourself or a close associate of a person in a public position.

In these scenarios you may find slightly more stringent controls around your onboarding/ KYC process. For example, you may need to have a copy of your ID and utility bill accredited by a finance professional, such as an accountant or a registered lawyer, that verifies they have indeed seen an original copy of documents and that you are a true likeness to the ID you have provided. You may also find that your first few payments are monitored a little more closely too – it could be that you have to provide an invoice or something that demonstrates you are paying the beneficiary you have set up.

Documents Required to Pass Through KYC as a Business

When international payment providers establish a new business relationship they will seek to obtain information on:

  • The purpose of your transactions, i.e. are you paying staff, paying overseas suppliers, conducting FX for treasury purposes.
  • Details of the type of business and industry you operate in.
  • The source and origin of funds that’s used to settle your transfers.
  • Copies of articles of association or, if applicable, recent and current financial statements instead.
  • The expected level of trading that will take place, usually estimated volumes over a year.
  • Identification and verification of 1-3 directors of the business and ultimate beneficial owners (known as UBOs – usually when they own over 25% of the business registering for an account).

Payment providers will want to verify there are no directors of your business with a history of financial crime or government orders that prevent them from holding the position of director in a business.

Depending on your business, there is usually a requirement to complete the identification and verification of 1-2 business directors. This verification process is the same as an individual completes when registering for an individual account. It is the same documents required to pass through KYC, i.e. passport/driving license and a valid proof of address. This would be for the directors personal address as opposed to the business address.

Enhanced Due Diligence for Businesses

Enhanced due diligence might be required for a number of reasons when it comes to business registrations, it could be that you operate in a high-risk industry, it could be the high volumes you are trading or it could be that your payments are to a ‘high-risk country’. In these instances, it could be that a payment provider asks for a greater number of your directors to be verified or perhaps the requirement to identify and verify all those who own more than 25% of the business is adjusted to a lower ownership threshold, say 15% for example.

It can be tempting to get frustrated with financial firms when they ask for this information, particularly from senior directors who are often busy, but it’s essential they complete their due diligence correctly and adhere to UK KYC requirements.

KYC Requirements EU

The key to understanding EU KYC requirements is identifying where the payment provider you are registering for is from. Financial services firms in the EU benefit from the ‘financial passport’, i.e. they are allowed to offer their services throughout the EU providing they are authorised by their home-country finance regulator. Despite this, there are no consistent EU KYC requirements. Whilst Germany asks for a video KYC process (ever had to turn your head from left to right and up and down when registering for a fintech?) another country like France asks for two identification documents but no video requirements. The EU provides an anti-money laundering directive which different countries adopt in different ways. The KYC requirements, therefore, will be dependent on the laws set in each EU country.

So if you’re registering for a financial services company who offers their product in your country but is registered and authorised abroad, don’t be surprised if they’re asking for slightly different documentation to what you’re used to providing.

KYC Requirements Australia

AUSTRAC, the Australian equivalent to the FCA, is responsible for preventing, detecting and responding to criminal abuse of the financial system. AUSTRAC stipulates this on Australian KYC requirements:

  • For individual customers, as a minimum requirement, financial services companies are expected to attain the full name as well as either the residential address or date of birth of the customer. The fact that only a date of birth OR residential address is required means the KYC requirements in Australia are actually slightly less severe than the KYC requirements in the UK. Note this would only be for low and standard due diligence customers. Australian firms would ask for more if you fall into the enhanced due diligence category.
  • For business customers, Australian financial services firms must collect information so that they are satisfied the customer exists. For example, if the customer is an Australian company, then the firm must collect and verify information including the full name of the customer, whether it is registered with the Australian Securities & Investments Commission (ASIC) as a public or proprietary company, and its Australian Company Number (ACN) or Australian Registered Body Number (ARBN).

Aussie financial services firms will then be able to verify if the information you have supplied is true by using reliable and independent documentation you have provided or reliable and independent electronic data or, as is often the case, a mix of both.

Final Word on Know Your Customer Requirements

There are no global standards for KYC, not even EU KYC requirements are standardised across all EU member states. A lot can depend on the cultural norms of each country and the laws set by domestic governments. The end goal is the same though – firms are expected to have a clear understanding of every customer they work with and prevent financial crime. Whether this be money laundering, fraud or terrorist financing. The documents required to pass through KYC are usually around identifying who you or your business are and then verifying that what you explain on your application is actually the case. Whilst banks are still old school in their KYC onboarding requests, often sticking to paper-based methods, new technology is improving the KYC process and many fintechs can now set you up with an account within hours, or even minutes.